DEERFIELD, IL -- (Marketwire) -- 08/07/08 -- Cosi, Inc. (NASDAQ: COSI), the premium
convenience restaurant company, today reported a net loss for the second
quarter ended June 30, 2008 of $(1,729,000), or $(.04) per basic and
diluted common share, compared with a net loss of $(7,401,000), or $(.19)
per basic and diluted common share, for the 2007 second quarter, or a 77%
reduction on a year-over-year basis. Excluding the effect of discontinued
operations in both quarters, Cosi's net loss in the 2008 and 2007 second
quarters was $(1,699,000), or $(.04) per share, and $(4,039,000), or
$(.10) per share, respectively. Cosi reduced its operating loss in the
second quarter of 2008 compared with the year-earlier period by
approximately 59%, to $(1,724,000) from $(4,176,000).
Cosi's total revenues for the 2008 second quarter grew 3.6% to $36,723,000
from $35,448,000 in the 2007 second quarter.
"We made good progress during the second quarter across every aspect of our
restaurant operations, particularly in light of the difficult consumer and
inflationary environment," said James Hyatt, President and Chief Executive
Officer. "We are comfortable that, even as we continue to drive further
operational improvements, our operational practices are now ready to
support profitable unit growth. It is a high priority of ours to assist
our franchise partners in their site development efforts as they build out
their territories, as well as to help them overcome the challenges of the
credit markets."
2008 Second Quarter Financial Performance and Restaurant Economics
Cosi achieved the aforementioned 3.6% increase in second quarter revenues
over the second quarter 2007, and reported a 2.3% increase in Company-owned
comparable sales over the prior year's second quarter, due primarily to
pricing increases as well as improved operational execution, which has
enabled restaurants to achieve higher volumes during peak periods while
earning high customer satisfaction ratings. Contributing to Cosi's total
revenues were the Company's growth in franchise fees and royalties to
$516,000 from $405,000 in the prior year's quarter and its growth in
restaurant net sales to $36,207,000 from $35,043,000 in the second quarter
2007.
Due to operational and cost management improvements, Cosi was able to
increase restaurant cash flow margin rate to 17.3% of restaurant net sales
from 15.6% in the prior year's second quarter, as well as achieve the
aforementioned reductions in operating and net losses.
In the 2008 second quarter, Cosi reduced restaurant level costs by 170
basis points as a percentage of restaurant net sales compared to the second
quarter 2007. Despite continued pricing pressures on commodities, Cosi was
able to limit its increase in the cost of food and beverages to 10 basis
points as a percent of restaurant net sales. Cosi reduced labor and
related benefits costs by 150 basis points as a percentage of restaurant
net sales, and reported a 30 basis point reduction in occupancy and other
restaurant operating expenses on a quarter over quarter basis.
Cosi reduced its general and administrative expenses, both on an absolute
basis and as a percentage of total revenues. General and administrative
expenses in the 2008 second quarter were $6,069,000, or 16.5% of total
revenues, compared with $6,142,000, or 17.3% of total revenues, in the 2007
second quarter.
Cosi reported that as of June 30, 2008 cash, cash equivalents, and
short-term investments were $6,041,000. Total stockholders' equity was
$30,137,000.
Development Performance
Cosi ended the second quarter with a total of 145 locations consisting of
102 Company-owned locations and 43 franchised locations. Two franchised
locations and one Company-owned location opened during the 2008 second
quarter, and one franchised location and one Company-owned location were
closed during the same period. Year-to-date, 10 franchised locations and
one Company-owned location have opened.
Cosi now expects franchisees to open a total of approximately 25 locations
in 2008, the lower end of its previous guidance of between 25 and 35 total
new franchised locations for the year.
Teleconference and Webcast Information
Cosi will host a teleconference and webcast at 5:00 p.m. Eastern Time today
to discuss its results for the 2008 second quarter.
To participate in the teleconference, investors and analysts are invited to
call 800-265-0241 in the U.S., or 617-847-8704 outside of the U.S., and
reference participant code 24834781. The conference call will also be
webcast simultaneously by accessing http://investors.getcosi.com/.
A replay will be available following the call until 12:00 AM ET on August
14, 2008. To access the replay, call 888-286-8010 in the U.S., or
617-801-6888 outside of the U.S., and reference the code 92279002.
About Cosi, Inc.
Cosi (http://www.getcosi.com) is a national premium convenience restaurant
chain that has developed featured foods built around a secret,
generations-old recipe for crackly crust flatbread. This artisan bread is
freshly baked in front of customers throughout the day in open flame stone
hearth ovens prominently located in each of the restaurants. Cosi's warm
and urbane atmosphere is geared towards its sophisticated, upscale, urban
and suburban guests. There are currently 102 Company-owned and 43 franchise
restaurants operating in eighteen states, the District of Columbia and the
United Arab Emirates. The Cosi vision is to become America's favorite
premium convenience restaurant by providing customers authentic,
innovative, savory food while remaining an affordable luxury.
The Cosi menu features Cosi sandwiches, freshly tossed salads, melts,
soups, Cosi bagels, flatbread pizzas, S'mores, snacks and other desserts,
and a wide range of coffee and coffee-based drinks and other specialty
beverages. Cosi restaurants are designed to be welcoming and comfortable
with an eclectic environment. Cosi's sights, sounds, and spaces create a
tasteful, relaxed ambience that provides a fresh and new dining experience.
"Cosi," "Cosi (w/hearth design)," "Simply Good Tastes" and related marks
are registered trademarks of Cosi, Inc.
Copyright 2008 Cosi, Inc. All rights reserved.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. This press release contains statements that constitute
forward-looking statements under the federal securities laws.
Forward-looking statements are statements about future events and
expectations and not statements of historical fact. The words "believe,"
"may," "will," "should," "anticipate," "estimate," "expect," "intend,"
"objective," "seek," "plan," "strive," or similar words, or negatives of
these words, identify forward-looking statements. We qualify any
forward-looking statements entirely by these cautionary factors.
Forward-looking statements are based on management's beliefs, assumptions
and expectations of our future economic performance, taking into account
the information currently available to management. Forward-looking
statements involve risks and uncertainties that may cause our actual
results, performance or financial condition to differ materially from the
expectations of future results, performance or financial condition we
express or imply in any
forward-looking statements. Factors that could contribute to these
differences include, but are not limited to: the cost of our principal food
products and supply and delivery shortages or interruptions; labor
shortages or increased labor costs; changes in consumer preferences and
demographic trends; expansion into new markets including foreign markets;
our ability to locate suitable restaurant sites in new and existing markets
and negotiate acceptable lease terms; competition in our markets, both in
our business and in locating suitable restaurant sites; our operation and
execution in new and existing markets; our ability to recruit, train and
retain qualified corporate and restaurant personnel and management; cost
effective and timely planning, design and build-out of restaurants; our
ability to attract and retain qualified franchisees; the availability and
cost of additional financing, both to fund our existing operations and to
open new restaurants; the rate of our internal growth and our ability to
generate increased revenue from our existing restaurants; our ability to
generate positive cash flow from existing and new restaurants; the
reliability of our customer and market studies; fluctuations in our
quarterly results due to seasonality; increased government regulation and
our ability to secure required governmental approvals and permits; our
ability to create customer awareness of our restaurants in new markets;
market saturation due to new restaurant openings; inadequate protection of
our intellectual property; adverse weather conditions which impact customer
traffic at our restaurants and adverse economic conditions. Further
information regarding factors that could affect our results and the
statements made herein are included in our filings with the Securities and
Exchange Commission.
Additional information is available on the company's website at
http://www.getcosi.com in the investor relations section.
Cosi, Inc.
Consolidated Balance Sheets
As of June 30, 2008 and December 31, 2007
(dollars in thousands, except share and per share data)
June 30, December 31,
2008 2007
----------- -----------
(Unaudited) (Note 1)
Assets
Current assets:
Cash and cash equivalents $ 6,041 $ 6,309
Accounts receivable, net 642 658
Inventories 1,009 1,045
Prepaid expenses and other current assets 3,103 3,796
Assets held for sale - 122
Assets of discontinued operations - 35
----------- -----------
Total current assets 10,795 11,965
Furniture and fixtures, equipment and leasehold
improvements, net 39,882 42,477
Intangibles, security deposits and other assets,
net 1,949 1,970
----------- -----------
Total assets $ 52,626 $ 56,412
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,742 $ 2,106
Accrued expenses 9,950 9,014
Deferred franchise revenue 474 783
Current liabilities of discontinued operations 27 285
Current portion of other long-term liabilities 368 465
----------- -----------
Total current liabilities 12,561 12,653
Deferred franchise revenue 2,869 2,730
Other long-term liabilities, net of current
portion 7,059 7,183
----------- -----------
Total liabilities 22,489 22,566
----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock - $.01 par value; 100,000,000
shares authorized,
41,155,851 and 41,047,985 shares issued,
respectively 412 411
Additional paid-in capital 276,234 275,187
Treasury stock, 239,543 shares at cost (1,198) (1,198)
Accumulated deficit (245,311) (240,554)
----------- -----------
Total stockholders' equity 30,137 33,846
----------- -----------
Total liabilities and stockholders' equity $ 52,626 $ 56,412
=========== ===========
Cosi, Inc.
Consolidated Statements of Operations
For the Three and Six Month Periods Ended June 30, 2008 and July 2, 2007
(dollars in thousands, except share and per share data)
Three Months Ended Six Months Ended
June 30, July 2, June 30, July 2,
2008 2007 2008 2007
---------- ---------- ---------- ----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues:
Restaurant net sales $ 36,207 $ 35,043 $ 68,666 $ 65,732
Franchise fees and royalties 516 405 1,248 837
---------- ---------- ---------- ----------
Total revenues 36,723 35,448 69,914 66,569
---------- ---------- ---------- ----------
Costs and expenses:
Cost of food and beverage 8,261 7,961 15,797 15,060
Restaurant labor and
related benefits 11,778 11,900 23,016 22,725
Occupancy and other restaurant
operating expenses 9,930 9,703 19,685 18,664
---------- ---------- ---------- ----------
29,969 29,564 58,498 56,449
General and administrative
expenses 6,069 6,142 11,106 12,121
Depreciation and
amortization 2,056 2,207 4,167 4,267
Restaurant pre-opening
expenses 73 311 100 581
Provision for losses on
asset impairments and
disposals 267 945 267 945
Closed store costs 13 262 47 262
Lease termination expense - 193 243 193
---------- ---------- ---------- ----------
Total costs and
expenses 38,447 39,624 74,428 74,818
---------- ---------- ---------- ----------
Operating loss (1,724) (4,176) (4,514) (8,249)
Interest income 27 139 72 344
Interest expense (2) (2) (3) (4)
---------- ---------- ---------- ----------
Loss from continuing
operations (1,699) (4,039) (4,445) (7,909)
Discontinued operations:
Loss from discontinued
operations (30) (3,362) (312) (3,697)
---------- ---------- ---------- ----------
Net loss $ (1,729) $ (7,401) $ (4,757) $ (11,606)
========== ========== ========== ==========
Per Share Data:
Loss per share, basic and
diluted
Continuing operations $ (0.04) $ (0.10) $ (0.11) $ (0.20)
Discontinued operations $ (0.00) $ (0.09) $ (0.01) $ (0.09)
---------- ---------- ---------- ----------
Net loss $ (0.04) $ (0.19) $ (0.12) $ (0.30)
========== ========== ========== ==========
Weighted average shares
outstanding: 40,030,460 39,353,590 39,980,356 38,962,370
========== ========== ========== ==========
As a percentage of
restaurant net sales:
Cost of food and
beverage 22.8% 22.7% 23.0% 22.9%
Labor and related
benefits 32.5% 34.0% 33.5% 34.6%
Occupancy and other
operating expenses 27.4% 27.7% 28.7% 28.4%
Cosi, Inc.
Restaurant Count
For the Three Months Ended
June 30, 2008 July 2, 2007
------------------------- -------------------------
Company- Company-
Owned Franchise Total Owned Franchise Total
-------- -------- ----- -------- -------- -----
Restaurants at
beginning of period 102 42 144 113(a) 19 132
New restaurants opened 1 2 3 1 3 4
Restaurants permanently
closed 1 1 2 1 - 1
-------- -------- ----- -------- -------- -----
Restaurants at end of
period 102 43 145 113(a) 22 135
======== ======== ===== ======== ======== =====
(a) Includes nine locations that are classified as discontinued operations
For the Six Months Ended
June 30, 2008 July 2, 2007
------------------------- -------------------------
Company- Company-
Owned Franchise Total Owned Franchise Total
-------- -------- ----- -------- -------- -----
Restaurants at
beginning of period 107(b) 34 141 110(a) 13 123
New restaurants opened 1 10 11 4 9 13
Restaurants permanently
closed 6 1 7 1 - 1
-------- -------- ----- -------- -------- -----
Restaurants at end of
period 102 43 145 113(a) 22 135
======== ======== ===== ======== ======== =====
(a) Includes nine locations that are classified as discontinued operations
(b) Includes three locations that are classified as discontinued operations
CONTACT:
William E. Koziel
Chief Financial Officer
(847) 597-8803
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